Adenylyl cyclases play a pivotal role in signal transduction by carrying out the regulated synthesis of cyclic AMP. The nine cloned mammalian adenylyl cyclases all share two conserved regions of sequence, C1 and C2, which are homologous to each other and are together responsible for catalytic activity. Using limited proteolysis and mass spectrometry, we have mapped the boundaries of a minimal stable and active C2 catalytic domain to resiudes 871-1090 of type II adenylyl cyclase. We determined the crystal structure of the C2 catalytic region at an effective resolution of 2.6 Angstroms. The structure has an alpha and beta fold in a wreath- like dimer, which has a central cleft. Two forskolin molecules bind in the hydrophobic pockets at the ends of the cleft. The central part of the cleft is lined with charged residues implicated in ATP binding. Forskolin activates adenylyl cyclase by promoting the assembly of the active dimer and by direct interaction within the catalytic cleft. The interaction between the alpha subunit of G protein s and the cytoplasmic domains of adenylyl cyclase is a key step in the stimulation of cAMP synthesis by hormones. Mutational analysis reveals three discrete regions in the primary sequence of adenylyl cyclase the affect the EC-50 values for Gsa activation, and thus are the affinity determinants of Gsa. The structure shows that these three regions are close together and form a negatively charged and hydrophobic groove the width of an alpha helix which can accommodate the positively charged adenylyl cyclase binding region of Gsa. These mutations are distal to the catalytic site hence modulate activity by controlling the orientation of two domains in the dimer.